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Accounting Fraud

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Top Ten SEC and CFTC Recoveries of 2020

Posted  01/15/21
top ten list
Despite its many shortcomings, 2020 did bring great news for whistleblowers: record-breaking growth in the CFTC and SEC Whistleblower Programs, as well as massive enforcement actions by both agencies.  In this post, we will detail the Top Ten SEC and CFTC recoveries of 2020 in cases other than FCPA enforcement.  As detailed below, the SEC netted billions of dollars in penalties and restitution from companies accused...

December 23, 2020

RPM International Inc. and Edward W. Moore, its general counsel and chief compliance officer, will pay a $2 million penalty to resolve allegations that the roofing company violated generally accepted accounting principles in failing to timely disclose a material loss contingency or accrual arising from its knowledge that the government was investigating alleged overcharges by RPM on government contracts.  In August 2014, RPM restated its results in three prior quarters, although it allegedly knew about the investigation and the company’s exposure earlier.  SEC

December 16, 2020

China-based Luckin Coffee will pay a penalty of $180 million to resolve charges that the company defrauded investors by materially misstating the its revenue, expenses, and net operating loss in an effort to falsely appear to achieve rapid growth and increased profitability and to meet earnings estimates. The SEC alleged that over the course of more than a year, Luckin intentionally fabricated more than $300 million in retail sales, and $190 million in expenses, by using related parties to create false transactions and inflated expenses. Luckin overstated its revenue by 28% and 45% in two different quarters, and raised more than $864 million from debt and equity investors during the relevant time period. Luckin ADRs were traded on NASDAQ until July, 2020.  SEC

September 24, 2020

BMW AG and two of its U.S. subsidiaries will pay $18 million to resolve charges that its public reporting inflated retail sales in the U.S. between 2015 and 2017, allowing it to meet sales targets.  This information, which BMW allegedly knew to be inaccurate, was then provided to investors in bond offerings by BMW’s U.S. subsidiary.  SEC

August 25, 2020

Computer manufacturer Super Micro Computer, Inc. has agreed to pay a penalty of $17.5 million to resolve allegations that the company prematurely recognized revenue and understated expenses.  The SEC alleged that the company, including its former CFO, Howard Hideshima, pushed employees to maximize end-of-quarter revenue.  Hideshima agreed to pay disgorgement and penalties totaling $350,000.  SEC

July 31, 2020

Canadian company Bausch Health, formerly known as Valeant Pharmaceuticals, will pay a $45 million penalty to resolve charges that its executives engaged in improper revenue recognition and misleading disclosures in SEC filings and earnings presentations between 2014 and 2015.  The company was alleged to have recorded false sales of products to specialty pharmacy Philidor Rx Services and its affiliates, which were controlled by Valeant.  In addition, Valeant allegedly misrepresented the source and materiality of revenue it received following a 500% increase in the price of its diabetes drug Glumetza.  Former CEO J. Michael Pearson will pay a civil penalty of $250,000; former CFO Howard B. Schiller will pay a civil penalty of $100,000; former controller Tanya Carro will pay a civil penalty of $75,000.  The individuals also agreed to return specified portions of their incentive compensation to the company.  SEC

February 19, 2020

Diageo plc will pay $5 million to resolve SEC charges that the alcohol producer's North American subsidiary, Diageo North America, engaged in channel-stuffing by pressuring distributors to buy products in excess of demand in order to meet internal sales targets in the face of declining market conditions. Diageo failed to disclose the trends that resulted from shipping products in excess of demand, the positive impact the overshipping had on sales and profits, and the negative impact that the unnecessary increase in inventory would have on future growth. SEC

Top Ten SEC and CFTC Recoveries of 2019

Posted  01/24/20
Silver Whistle Hanging
2019 was another busy year for the SEC and CFTC.  Once again, the SEC netted hundreds of millions of dollars in penalties and fines from companies and individuals accused of defrauding investors, breaching fiduciary duties, and violating the securities laws.  And that’s in addition to the SEC’s robust FCPA enforcement in 2019.  Meanwhile, the CFTC continued to root out market manipulators and other fraudsters...

January 7, 2020

After self-disclosing to the government about grant accounting errors in 2011, the University of North Carolina at Chapel Hill (UNC) has agreed to pay back $4.5 million in excess funds received from the National Institutes of Health (NIH).  The errors had been in effect between two different periods, from 2007 to 2011 and from 2014 to 2017, and had caused the University to inadvertently charge salary costs to grants after the grant terms had ended.  USAO MDNC
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